A week ago, Bravura Solutions Limited (ASX:BVS) came out with a strong set of half-year numbers that could potentially lead to a re-rate of the stock. The company beat expectations with revenues of AU$135m arriving 4.8% ahead of forecasts. Statutory earnings per share (EPS) were AU$0.15, 2.8% ahead of estimates. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the latest consensus from Bravura Solutions's three analysts is for revenues of AU$285.6m in 2020, which would reflect a modest 7.1% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to increase 6.3% to AU$0.17. Yet prior to the latest earnings, analysts had been forecasting revenues of AU$293.7m and earnings per share (EPS) of AU$0.16 in 2020. If anything, analysts look to have become slightly more optimistic overall; while they decreased their revenue forecasts, EPS predictions increased and ultimately earnings are more important.
The average analyst price target increased 11% to AU$6.22, with analysts signalling that the improved earnings outlook is more important to the company's valuation than its revenue. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Bravura Solutions, with the most bullish analyst valuing it at AU$6.90 and the most bearish at AU$5.80 per share. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Bravura Solutions's past performance and to peers in the same market. We would highlight that Bravura Solutions's revenue growth is expected to slow, with forecast 7.1% increase next year well below the historical 14%p.a. growth over the last three years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 20% next year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Bravura Solutions to grow slower than the wider market.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around Bravura Solutions's earnings potential next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. Even so, earnings are more important to the intrinsic value of the business. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Bravura Solutions going out to 2022, and you can see them free on our platform here..
We also provide an overview of the Bravura Solutions Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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